proposition and where we are relative to it. one of the top items was more money coming from the general fund to the mta, and there's great interest on the part of labor to nowhere is that money going. service improvements relative to staffing, so we had a good discussion about that. they have basically said that they want the mta board to know that these discussions are happening and that they haven't interest in seeing that the spirit and intent and words of the proposition are carried forward, so i just wanted to let you know that we will be continuing those discussions and, again, in keeping with the requirements of prop a. i did want you to know that the mayor had convened a meeting with me and the bike coalition,

and the mayor's transportation policy advisor one month or so ago. that topic, we have since had some discussions, staff level, between our communications folks, the bike folks, the coalition with the police department along the lines of what you're talking about. from my observation, i agree with you on the acuteness of the need, and it is helpful to get that direction and support from the board. we will make sure to accelerate those efforts, and then finally, just a reminder, we have our workshop coming up on november. 14. it will be an all-day workshop starting at the mason center. the main things we will be covering is we will be giving an update on where we are with the strategic plan for the next six years, to get your feedback on that, and that will help guide our budget process, which is another thing.

we will give you an update on the preliminary base line for the next two fiscal years, what it looks like, to also get your direction as to the budget, said that will be november 14 at mason, and that concludes my report. president nolan: thank you. director heinicke? director heinicke: i do not know if you have had the chance to meet that man from rescue muni, but he has a discussion about that project and what he is happy with and what he wishes would also happen. i think there are some things that may be outside the scope of the project, but i realize as you are coming new to this job and learning this community, it might be helpful for us to give you input. i would suggest that mr.

sullivan, who is a thoughtful person with whom i have had some thoughtful discussions when i was coming up to speed about muni work, i would suggest to you that this might be one topic that you could reach out to him as you get to know him, because he and his organization care a great deal. director nolan: anyone else on this? >> secretary -- secretary bopo -- boomer: there are no speaker cards on this. director nolan: a really informative discussion. at some point, on a day like today, when we do not have a lot, to have a report from them. the director of the project is very impressive.

i think it is important for us to know all of this because we would certainly be impacted by this in the years ahead, so with members consent, do you want to say anything about that? >> i think that is a wonderful idea. eventually, the terminus of california high speed rail is really going to change downtown for the better. it has been an amazing project. i think we are aware of it and ready for it. some of the challenges that are still faced by high-speed rail and the downtown extension. there is a good proposal under way to have a shared alignment between caltrain and others. >> -- director nolan: maybe sometime when we are not too

busy, if the directors went to hear it. ok, secretary boomer: item number eight, the citizens' advisory council report, but he is not here. item nine, public comment. director nolan: will give you the first three minutes. good afternoon. >> i wanted to call your attention to what i consider to be a really wrong turn to some proposed legislation that is going to be coming to you i think in early december. a series of amendments that have been on the table for a long time, and recently inserted into

them are provisions that would constitute a huge expansion of the medallion sales pilot program which is coming to kind of a natural conclusion as the number of sellers in the program has dwindled down. to, you know, next to nothing. and you had to be 70 years old or disabled to participate in the program, and that was a provision that was elaborated over i think it was 150 hours of town hall meetings, and numerous, i think it was five or six meetings of this board about aspects of this program. an intense amount of industry

input, and now, the direction it is going under this provision would allow 60-year-old sell their medallions, healthy 60-year-olds who did not purchase medallions. they would be able to go out and sell them, and this is simply the wrong way to go. what is needed now is a permanent program, a definitive program that defines -- because there are competing rights and competing interests here. there are people on the list to have waited 14, 15, 16 years for their medallions and are seeing the doors shut in front of them, and suddenly we are going to open the door wide to what might be another 300 medallion holders? it ain't right. it ain't right.

and just to comment on the process that brought this year, this as it -- was a recommendation of the taxi advisory council. they had a vote. of those votes, five were medallion holders who would directly benefit from this, and two others were taxicab company managers who depend on medallion holders and medallions to run their business, so this was not any kind of a disinterested decision. i support medallion holders who are disabled being able to sell, and i would support a medallion older who was turning 70 in the meantime to be able to sell, but not reducing to 60. director heinicke: next item. secretary boomer: any other

members of the public wish to speak? moving on to the consent calendar, previously, 10.1, not to 10.2, p to s have been severed, and seeing that no member of the public has asked for another to be severed -- president nolan: all in favor, say aye. all opposed? and we want to thank one person for coming. ms. boomer, next item. secretary boomer: can we call item 11 together? ok, item number 11, a discussion of the disclosure in due diligence. >> a set of bonds. this presentation this afternoon

is going to be done by sean tierney, who is the council from a firm, and the reason this is very important is because we have to make a pledge to the bondholders that we are disclosing all of the mta issues in our document so that their bondholders feel comfortable that we're being honest and forthright about our information, so the two gentlemen are going to walk through the legal requirements of this so you are fully aware of the implications of the bond issuance. we will turn that over. who goes first? mr. blake will go first. president nolan: good afternoon. >> i will take a moment here. i have some preliminary

comments first. commissioner, chair, the responsibilities imposed on the federal securities law on officials in connection of the authorization of debt in the capital market. i also want to thank another person for making this happen today. it is timely. i am mark blake, and i am a deputy city attorney. today, we are very pleasant -- pleased to have sean tierney from a law firm here, a national leader in this area. mr. tierney has an expensive -- extensive resume and the gray hairs to share for it and is an expert in the area of securities law. the law firm is also currently serving as disclosure counsel for the city and its principal adviser to the city and its general fund department for

securities law questions. our presentation today is in some sense part one of the board municipal securities disclosures training. this board has indicated will soon consider the issuance of bonds to achieve certain financial objectives for the s.f. mta, and we will review many of the same principles that we discussed today when that matter is taken up. the overview today concerns legal context in which the as 78 will borrow money from the capital markets -- in which the sfmta will borrow money from the capital markets. they are subject to provisions of the security law. when we offer bonds for purchase to investors, we are going to be deemed as speaking to the market. what this means in plain terms is that the city has potential

civil and criminal exposure would security laws. as well, the sfmta risks its reputation capital. of central relevance of us today is your responsibilities as board members in the chain of approval in the official statement. that is the document that will contain all of the materials, financial and operational information, that an investor will rely upon to make an informed investment decision. let me give you a little context. although municipal securities are not directly regulated by the united states securities and exchange commission, the sec does regulate the municipal market indirectly through its regulation of underwriters, broker-dealers, and other participants. it also does this by way of its

enforcement action and through public pronouncements. recently, the chair of the sec and certain of its commissioners have made an improvement to the securities disclosures packet for the court objected. in a july 15, 2009 s speech, the chairman, mary schapiro, stated more needed to be done to put disclosure of securities on par with the disclosure of corporate. i plan to work to request enhanced sec authority with respect to municipal securities disclosures so that investors in munis have the full complement of information they deserve about their investments. her comments were immediately followed by a more pointed speech on october 29 by commissioner walter entitled "regulation of municipal securities markets, investors

are not second-class citizens," where she states investors deserve the same level of high quality disclosure protection in the municipal market as they currently get in the corporate market and should not have to be forced to rely on good faith voluntary disclosure, and as an added benefit, i believe that improved municipal disclosure will give taxpayers a better idea of what their elected representatives are doing with their tax dollars. since then, there has been a steady drumbeat by the sec and others about perceived shortfalls associated with municipal securities disclosure practices. in the recent dodd-frank wall street consumer protection act, included in that legislation was the creation of an office of municipal securities that will report directly to the chair of the sec, and so what this makes clear is that the sec -- that

congress is becoming increasingly receptive to increased regulation by the sec and that more is certain to follow. to that end, staff, the city attorney's office, and outside disclosure council have established a process to assure the representation and the statements and the bishops' statement is accurate and not misleading. fair or not, the fcc reviews the boards as the final and responsible gatekeepers, so with that, we will go to slide one. the following presentation, we will address the applicable securities law. what is the law here? next, we will look at what the board will approve when it authorized the issuance of bonds, and finally, we will provide guidance to the board in terms of discharging, steps you

can take to discharge or legal responsibilities -- your legal responsibilities. we will answer a question you are all going to ask and give you guidelines to get comfortable with that question. sean will not taking to the first part of a presentation which is about the applicable law here. thank you. president nolan: good afternoon, mr. tierney. >> thank you. i will go back to the documentation. a few opening remarks. i think we're going to familiarize you with the applicable laws and documents in the process. i think that maybe one takeaway piece of advice is as government officials, you are familiar with the requirements for transparency in almost every aspect of what you do, so i

think in many ways, disclosure is similar to that. the securities market, investors. i think some of the ultimate advice is probably to encourage you to promote the culture of the disclosure, the disclosure practices. i think as board members, that is my advice. having said that, we are going to died in to the actual law here. the first slide -- ok. we are going to discuss the different contexts in which disclosure issues arise and the laws apply. the standards that apply, and various enforcement actions that need to be taken by the sec and private investors. ok. thank you. interestingly, the sec has no

direct jurisdiction over governmental entities in the same sense it does over private companies. private companies have to file a registration statement with the sec and are subject to detailed regulations that tell them exactly what they are supposed to disclose. in the municipal securities area, the primary lot you are subject to are the antifraud provisions. there is no detailed guidance, but you are still subject to the basic requirement of telling the truth and the whole truth to investors. however, the sec does have jurisdiction over the underwriters, the investment bankers who underwrite your bonds, and they have over the last decade or two exercised more specific control over municipal underwriting and

issuance by way of this jurisdiction. so, for example, the rules that require the underwriters to enter into an agreement with you that provides for certain types of ongoing disclosure and practices, you are subject to indirectly. so it is good to start with the idea of what is disclosure, when does it arise, when should you be thinking about whether the federal securities laws might be an issue. this breaks it down into three categories. the primary disclosure, that is what we are doing with now, doing more first bond issue, so we are drafting what is called an official statement with staff and professionals. that will go out to investors,

both as the bonds are being marketed, with everything material about the bonds and yourselves, and then a final official statement its printed after the bonds are priced. that is basically the final record of all of the material information about the bond issue, and you will be familiar with that probably more than you would like by that time. secondary market disclosure, this is an example of the indirect jurisdiction i mentioned. once a year, you will have to file an annual report. that will be in the repositories that are available for investors in the secondary market. you also have to file notices of certain material information, if something bad happened with response to your bonds. you would have to make that known to investors. there are specific events, the

most obvious would be default, a tax, if there was an issue with tax exemption, that would require a filing, and so on. and finally, the area that can present some gray areas is other types of communications. the federal securities laws apply whenever your communications might reach investors, and so anything from a press release, a discussion with a rating agency, material that is on your website, official reports that are produced regularly by the city, they are all potentially subject to the securities laws in a sense that investors look to them for information and rely on them, look at them possibly, and look at them in the context of about winning your bonds.

ok. so as i mentioned at the outset, there is one primary rule that applies from which sprouts all of the other details and obligations, and that is the anti-fraud provisions. the standard is defined in 10- b5. it is a pretty short standard, according to bob today, and when it comes down to is disclosing material facts and not omitting material facts. basically, tell the truth and tell everything that you should that an investor would want to know. as a principle, it is pretty straightforward. the challenge can be in the details and trying to figure out how to put together good

disclosure. a key issue of that is what is material. a lot of times we get asked, "how do we know what is material?" it is not a scientific process, but what the courts have made clear, and you should look at it from the perspective of the investor, not from your own perspective, in essence of what you consider to be material. "oh, this should not matter" or "this should not matter." that is where our most difficult discussions and judgment calls and frankly hard work in trying to draft things that are clear, not overly concerned, causing concerns, but getting for the

the things we think could be material. ok, so there is three ways that the s.c.c. carries out enforcement actions -- the sec carries out enforcement actions. unreasonable basis, where they take you to court, an issuer or other participants come to court for a civil charge. and on the criminal bases, where they bring in the department of justice. then it is also possible for others to bring causes of action. if they feel they have been harmed by buying the bonds, they can also bring claim.

ok, so, who are the enforcement actions against? basically, they have touched on everyone who has been involved in the bond issue. you know, the issue were -- the issuer, the individual board members, government officials and employees and all the third party professionals. they have all had charges and been written about in the reports and chastised and so on and so forth. to this date, no individual board members have been held liable. the orange county board did approve a settlement, and it was speculated that in san diego, there might be action against individual board members, but to date, no individual board members.

very few public officials have been held individually responsible, but there has been some of that in san diego. >> [inaudible] director heinicke. [laughter] director heinicke: certainly not. [laughter] that is what we will avoid. if you listen closely, hopefully. >> ok. i am going to touch on just a few of the major recent enforcement actions. i think it is useful just to kind of bring it home. you are probably familiar with these as they occurred. we are going to touch on the orange county, the city of san diego and the state of new

jersey, which is the most recent one. as you recall, orange county -- i mean, they ended up going bankrupt, so it was quite a mess. all the bonds, i think, were paid in full. some of the payments may have been delayed, but in some sense, the conclusion of the story was that everyone did eventually get paid. however, at the time, the county was running basically a significant part of its budget off of a derivative scheme, or they were investing in very dangerous investments that were working to generate a lot of revenues -- risky investments. all well and good except that none of it was disclosed. so really, that is what got them in trouble. i mean, the investments

themselves did not help because they crashed. all those investments started to go south. but what they got in trouble with with the sec was not disclosing that they had these investment schemes and that the budgets were relying on revenues from these investments. the report that was produced really started the current trend of focusing on the issuer's responsibility for the official statement, the board pose irresponsibility. the sec took a pretty hard line on the responsibility of the board, and the public officials, to have done a better job. the standard,